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Home Opinions Blurb

Chellarams Plc has a bleak future

Onome Ohwovoriole by Onome Ohwovoriole
September 20, 2017
in Blurb
Chellarams Plc has a bleak future
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Chellarams Plc is a company trading on the Alternative Securities Market (ASEM) of the Nigerian Stock Exchange. The company has operations in various sectors of the economy including trading, real estate, fast, information technology and power generation. One of the company’s easily recognised brands is the Kentucky Fried Chicken which has branches across the country.

Weaknesses

A large proportion of the company’s revenues are earned from Fast Moving Consumer Goods (FCMGs), sale of plastic film, and industrial chemicals. Of the N12 billion in revenue earned by the  company in 2016, N3.8 billion was from FCMG, N2.7 billion was earned from industrial chemicals and N3.8 billion from the sale of plastic film. FCMG comprises sale of milk. This leave the company at the risk of exchange rate volatility as was witnessed in 2016.  Exchange rate losses increased from N400 million in 2016 to N600 million in 2017.

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Revenue has also been declining across key segments. Revenue from the FCMG segment declined from N7.5 billion in 2015 to N3.8 billion in 2017. Revenue from Industrial chemicals also declined from N10.8 billion in 2015 to N2.7 billion in 2017.

Revenue segment2015 Earnings2016 Earnings2017 Earnings
FCMG7,550,6436,308,9313,840,876
Industrial Chemicals10,898,5327,891,7522,728,452
Machinery1,729,9221,313,7691,110,955
Plastic film1,867,8642,217,5293,822,990

Shareholders have nothing to cheer about

In terms of value added, shareholders have very little to benefit as a greater percentage of the company’s earnings are spent on bank charges and employee benefits.  Figures from the March 2017 annual report show 33% of the company’s revenues go to paying employees, wages salaries and benefits while 36% goes to providers of capital.

Negative retained earnings of N1.1 billion as at March 2017, means the company is unlikely to pay dividends anytime soon.

Threats

Though the company has signed an MOU with a German firm to begin dairy production in the country, the sector is one that has stiff competition from the likes of Cowbell, and WAMCO (makers of Peak Milk) who are dominant players in that segment . The Dangote Group has also unveiled plans to go into dairy production in the next two years.

Outlook

Except the company embarks on a fund raising drive for its expansion plans, it will continue to play second fiddle in the areas it operates. Declining revenues are a symptom of the company losing market share to its competitors.


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Onome Ohwovoriole

Onome Ohwovoriole

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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